McDonald’s CFO Must Defend Margins From Bargains

Senior Editor

With 2012 coming to an end, it’s time again to look at a group of CFOs who will factor prominently in their companies’ successes and failures over the next 12 months. This year’s list includes veteran finance chiefs taking on expanded roles and well-known names looking to make a mark on their new companies – including one who stepped back into a divisional role that could send her career to new heights.

McDonald’s CFO Peter Bensen’s top priority in 2013 might well be maintaining the fast food chain’s margins if it finds itself mired in a price war with competitors eager to take a bite out of its market share.

“In 2013, the biggest challenge [for Bensen] is managing the margins,” said Peter Saleh, senior restaurant analyst with Telsey Advisory Group. The fear is that customers will come solely for the value items and shy away from its pricier and higher-margin offerings, he said. Telsey doesn’t assign ratings to stocks, but Saleh keeps a $103, 12-month target on McDonald’s.

McDonald’s

McDonald’s CFO Pete Bensen needs to keep an eye on company margins in 2013, analysts say.

Bensen, 50, has a fairly traditional auditing, accounting and finance background. He joined the company in 1996 as director of financial accounting and reporting, and rose to assistant controller and then controller before becoming CFO at the beginning of 2008. Before McDonald’s, he was a senior manager for large multi-national audit clients at Ernst & Young in Chicago, according to a biography posted on the McDonald’s website. McDonald’s declined to make Bensen available, and a spokeswoman declined to comment for this article.

McDonald’s gave investors a jolt last month when it reported its first monthly year-over-year, same-store-sales drop in nine years for October. Profits have also declined for two consecutive quarters versus the prior-year periods. In October it said it would shift advertising focus back to its “Dollar Menu” after having directed ad spending at its slightly higher priced “Extra Value Menu.”

On Monday, it said it returned to growth in November and handily beat analysts’ modest expectations for comparable-store sales growth, citing both its value and premium food offerings. But analysts said it will be difficult for the company on a comparative basis through at least the winter, which could pressure management to take action.

Bensen “has to be the voice of reason,” said Andy Barish, managing director of equity research for Jefferies & Co. “There needs to be a little bit of balance and discipline” when it comes to pricing.

Earnings may remain “flattish” through 2013 because of a struggling economy and the difficult comparisons, Barish said, but that’s “not a disaster.” Jefferies rates McDonald’s stock a “hold” with an $83 target.

McDonald’s shares closed Monday at $89.41, which is down 12.5% from its all-time high in January.

Real estate industry veteran Diane Morefield, EVP and CFO of Strategic Hotels & Resorts, Inc., discusses the challenges she has undertaken throughout her career in both finance and operational roles and her management style. While viewing herself as a “conservative voice” in an industry known for risk-taking, she says it's important to take risks when it comes to building one's career.